Access the full text.
Sign up today, get DeepDyve free for 14 days.
References for this paper are not available at this time. We will be adding them shortly, thank you for your patience.
Purpose – The purpose of this paper is to empirically examine the extent at which idiosyncratic and financial market uncertainty affect the UK private manufacturing firms' investment decisions. Design/methodology/approach – A firm‐level panel data covering the period from 1999 to 2008 drawn from the Financial Analysis Made Easy database was analyzed using the system‐generalized method of moments (GMM) technique to purge time‐invariant unobserved firm‐specific effects and to mitigate the potential endogeneity issues. Findings – The results from the two‐step robust system‐GMM estimation indicate that firms significantly reduce their capital investment expenditures when uncertainty (measured by either form) increases. The findings also reveal that private firms' investment is more sensitive to idiosyncratic uncertainty than to financial market uncertainty. The results related to firm characteristics suggest that the firm‐specific variables such as debt‐to‐assets ratio, growth of sales and cash flow‐to‐assets ratio are also important in the determination of private firms' investment. The sensitivity analysis confirms that the findings are robust to an alternative method of estimation as well as to an alternative measure of idiosyncratic uncertainty. Practical implications – The findings of the paper are useful for firms' investment decisions and authorities in designing effective fiscal and monetary policies. Originality/value – The main value of this study is to investigate the effects of both idiosyncratic and financial market uncertainty on the investment decisions of private limited manufacturing firms.
The Journal of Risk Finance – Emerald Publishing
Published: Aug 16, 2011
Keywords: Idiosyncratic uncertainty; Financial market uncertainty; Investments; Private limited firms; United Kingdom
Read and print from thousands of top scholarly journals.
Already have an account? Log in
Bookmark this article. You can see your Bookmarks on your DeepDyve Library.
To save an article, log in first, or sign up for a DeepDyve account if you don’t already have one.
Copy and paste the desired citation format or use the link below to download a file formatted for EndNote
Access the full text.
Sign up today, get DeepDyve free for 14 days.
All DeepDyve websites use cookies to improve your online experience. They were placed on your computer when you launched this website. You can change your cookie settings through your browser.